The short answer is the U3S needs to be powered. It is not powered from the Arduino. There's a doc at QRP Labs site covering updating a QCX, but the procedure works the same for U3S.
Here's a snip from the PDF:
I have flashed both my U3S and QCX using this procedure. The only glitch in the doc is in Step 4e "Select ATmega328 as the MCU" It should be ATmega328P. I believe Hans has stated this is the chip they usually ship.
--Al
WD4AH